Abstract

Many foreign financial and professional service institutions believe that China will become one of their biggest global markets. Since accession to the WTO, the Chinese financial industry has been greatly opened to foreign financial institutions; this has attracted many financial firms operating in this market. However, high employee turnover rate in this industry has been reported.

Many studies have identified "Pay" is the most important motivators for Chinese employees. And according to the expectancy theory, if performance related pay is designed, implemented and operated effectively, this will have great motivational impact on employees' behaviour and performance. It is important to conduct this study and identify what pay schemes are adopted by foreign financial MNCs in China and what they value in terms of the objectives of pay schemes they trying to achieve. This should help financial MNCs identify the difference between their pay practices and the market norm. The second aims of this study is to evaluate the effectiveness of the performance related pay in employees motivation and performance in these companies, the expectancy theory is applied to exam the managers' views on this. Potential improvements are suggested for the companies in this study and hopefully can enlighten other financial companies in China.

This study found all foreign financial MNCs in China adopted the combined set of measures balances individual and collective performance. Each company rewards performance in meaningful ways. Each firm in this study has found its own way to attract and retain their talent employees rather than adopting someone else's programme. Each firm rewards differently reflecting its business strategy, HR priorities, work context and everything related to their local circumstances. The implication is that companies should link their reward strategy with their business objectives.

Second, according to the expectancy theory, this study suggests that the motivational impacts would be greater for Companies C3 and C5, as training was more extensive; managers' perception of internal equity of the employee performance appraisal was stronger and the amount involved to reward employees was larger, and larger pay differentiation for performance between the best and the rest in these two companies.